Alfa Banking Group, which includes Alfa-Bank and its subsidiaries, today reported audited IFRS financial results for 2010. Net profit of the Alfa Banking Group for the period amounted to USD 553 million (2009 — USD 77 million) and is the highest recorded profit in the 20-year history of Alfa Banking Group, representing a 19.1% return on average equity.
Total equity increased by 14.1% to USD 3.1 billion net of a USD 150 million dividend. Alfa Banking Group maintained a high capital adequacy ratio of 18.2% as of December 31, 2010 (December 31, 2009 — 20.2%).
In the reporting period Alfa Banking Group recorded an increase of its total assets of 31.6% from USD 21.6 billion at the end of 2009 to USD 28.5 billion at December 31, 2010, reflecting strong macroeconomic recovery and the ability of Alfa-Bank to attract new customers in both the corporate and retail segments.
The key factors driving profitability were a 21.6% increase of net margin (from USD 1.1 billion in 2009 to USD 1.3 billion in 2010), a 24.3% increase of net fee and commission income (from USD 255 million in 2009 to USD 317 million in 2010), increases in net income from investments and foreign currency transactions and a reduction of provisions for loan impairment. In addition the retail business unit recorded positive profit before tax for the first time, in the amount of USD 208 million.
As at December 31, 2010, total gross corporate loans increased 23.7% to USD 15.9 billion (USD 12.8 billion as at December 31, 2009), while total gross retail loans increased 8.7% to USD 2.3 billion (USD 2.1 billion as at December 31, 2009). The overall provisioning rate decreased by 2.5% from 10.1% as at December 31, 2009 to 7.6% as at December 31, 2010) mostly due to improving loan performance and write-offs of old unrecoverable loans. During 2010, the share of overdue loans in the total loan book decreased from 21.2% to 4.7%, while the share of restructured loans decreased from 11.5% to 5.7%.
In the funding structure of the Alfa Banking Group, customer accounts grew by 22.8% to USD 16.8 billion as of December 31, 2010 (USD 13.7 billion as of December 31, 2009). In March 2010, Alfa Banking Group placed USD 600 million in Medium Term Notes maturing in 2015 and bearing a fixed interest rate of 8% per annum. In September 2010, Alfa Banking Group placed USD 1 billion in Long Term Notes maturing in 2017 and bearing a fixed interest rate of 7.875% per annum. In February 2011 Alfa Banking Group placed RUB 5 billion five-year ruble bonds with a three-year buy back option and coupon payments of 8.25% per annum for the first three years. In December 2010, Alfa Banking Group exercised an option to repay USD 225 million subordinated notes issued in 2005, maturing in 2015, bearing a fixed interest rate of 8.625% per annum. In August 2010, Vnesheconombank decreased the interest rates on the subordinated loans to Alfa-Bank maturing in 2019 and 2020 to 6.5% and 7.5% respectively.
Alfa Banking Group has paid careful attention to the management of its liquidity and capitalization risks. At 31 December 2010, Alfa Banking Group held approximately 21% of its total assets in cash and short-term interbank instruments. Furthermore, Alfa-Bank has access to additional liquidity sources, including an investment portfolio of highly liquid assets, and secured borrowing facilities provided by the Central Bank of Russia.
The Alfa Banking Group has maintained its position as the top Russian private bank by total assets, total equity and customer accounts. In 2010 the Alfa Banking Group continued its development as a universal bank with the following core business lines: corporate and investment banking including SME, trade and structured finance, leasing and factoring, retail banking (including branch banking, auto and mortgage lending). Special focus is being placed on developing banking products for smaller businesses as well as remote distribution channels and internet acquiring. Current strategic priorities include effective management of assets and liabilities in order to further increase profitability, steady increase of the loan portfolio with focus on borrowers’ quality, maximizing commission income, further development of settlement business and banking e-services and further improvement of client service quality.
In March 2011, Standard & Poor’s upgraded the long term credit rating of the Alfa Banking Group from B+ to BB-, with a stable outlook. Moody’s confirmed their rating at Ba1 and changed their outlook from negative to stable in November 2010. Fitch upgraded their credit rating to BB, stable outlook in July 2010. Alfa Banking Group’s IFRS figures have been audited by PricewaterhouseCoopers.